The Theory of Wages

The Theory of Wages is a book by the British economist John R. Hicks published in 1932 (2nd ed., 1963). It has been described as a classic microeconomic statement of wage determination in competitive markets. It anticipates a number of developments in distribution and growth theory and remains a standard work in labour economics.[1]

Part I of the book takes as its starting point a reformulation of the marginal productivity theory of wages as determined by supply and demand in full competitive equilibrium of a free market economy. Part II considers regulated labour markets resulting from labour disputes, trade unions and government action. The 2nd edition (1963) includes a harsh critical review and, from Hicks, two subsequent related articles and an extensive commentary.

The book presents:

Topical outline

The body of the second edition is 384 pages, following a 9-page analytical table of Contents. It is organized as follows.

Section I. The Text of the First Edition (248 pages)
Part I — The Free Market
Chapter
I.    Marginal Productivity and the Demand for Labour
II.    Continuity and Individual Differences [analysing current objections to marginal productivity]
III.   Unemployment [examining different effects from "normal unemployment," casual unemployment, seasonal unemployment and other
      foreseeable factors, such as wage rigidity]
IV.  The Working of Competition [including the theory of "bargaining advantage," local and occupational differences in wages, labour mobility,
       and exploitation of labour]
V.   Individual Supply of Labour [including variations in wages from efficiency of labour and effect of wage rates on labour supply]
VI.  Distribution and Economic Progress [on absolute and relative shares of labour in social income as influenced by elasticity of substitution,       an increase in the supply of one factor of production, and invention].

Part II — The Regulation of Wages
VII.  The Theory of Industrial Disputes [including origins of labour combinations, the idea of a fair wage, diagrammatic treatment of strike
       duration, and conditions favoring labour union success]
VIII. The Growth of Trade Union Power
IX.   Wage-Regulation and Unemployment
X.    Further Consequences of Wage-Regulation
XI.   Hours and Conditions

Appendix [with discussion and mathematical proofs on statements in Chapter IV about absolute and relative shares of income (the "Social Dividend") relative to its elasticity of derived demand, with or without increasing returns]

Section II. Documents (57 pages)

Section III. Commentary (80 pages) [on respective earlier chapters and Section II documents, concluding with mathematical "Notes" on the elasticity of substitution as to its definition, generalization to multiple factors and products, and application to Marshall rules of derived demand]

See also

Notes

  1. ↑ • M. W. Reder, 1965. [Review], Economica, N.S., 32(125), p. 88.
    • Paul Flatau, 2002. "Hicks’s The Theory Of Wages: Its Place in the History of Neoclassical Distribution Theory," History of Economics Review, June, p. 44 (press +).
    • Andrew J. Oswald, 1985. "The Economic Theory of Trade Unions: An Introductory Survey," Scandinavian Journal of Economics, 87, No. 2, Proceedings of a Conference on Trade Unions, Wage Formation and Macroeconomic Stability, p. 160.
  2. ↑ • Christopher Bliss, 1987 [2008]. “Hicks, John Richard," The New Palgrave: A Dictionary of Economics, v. 2, sect. 2, p. 642. Abstract.
       • Paul Flatau, 2002. "Hicks’s The Theory Of Wages: Its Place in the History of Neoclassical Distribution Theory," History of Economics Review," June, pp. 44-65 (press +).

References

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